An AOL logo is posted outside the building where the company's headquarters is located, Tuesday, May 12, 2015 in New York. Verizon is buying AOL for about $4.4 billion, advancing the telecom's push in both mobile and advertising fields. (AP Photo/Mark Lennihan)

Look Out Facebook. Verizon-AOL Is Coming After You

The media conglomerate AOL has found a powerful parent in telecom giant Verizon, the companies announced Tuesday.

Verizon’s offer to purchase AOL for $4.4 billion in cash accelerates the mobile and desktop service provider’s push into one of the most lucrative and fast-growing industries in the space today: mobile video ads.

Under the leadership of former Google executive Tim Armstrong, AOL has quietly invested in and expanded its ad platform business, turning the company best known for it legacy dial-up Internet service into a significant player in both original mobile video content and mobile ad delivery.

The mobile and video advertising markets are a giant bright spot for the ad tech space, with revenues for each expected to reach $40 billion over the next four years, according to Armstrong, speaking in a CNBC video on Tuesday.

Naturally, the race to win this new profit stream is well underway—with Facebook and Google today’s leaders to beat. Together, the two giants owned a combined share of over 55 percent of the mobile ad market in 2014, to AOL’s 2.1 percent, according to eMarketer. But that could change.

In an interview with The Wall Street Journal, Armstrong said he believed AOL’s combination with Verizon would allow the new company to compete with Facebook and Google, and play in the mobile media and advertising sectors. Basically, it’s the boost that both companies needed.

User Data

The marriage will combine Verizon’s 1.5 billion mobile and network-connected devices and 5.6 million U.S. household FiOS TV service subscribers with AOL’s 2.1 million Internet customers and content properties, including The Huffington Post and TechCrunch. The ad delivery configurations it brings are vast.

The most successful mobile ad companies are those that know a lot about their customers.

Perhaps the largest advantage of the merger could be its ability to deliver insights into how a consumer, who may be walking down 7th Avenue in Manhattan approaching a Home Depot, for example, could benefit from a targeted ad for that new shelving or gardening tool he or she needs.

Verizon’s got the location data and other user data captured for its subscribers, and AOL’s got the content that will keep users engaged on their smartphones long enough to get that ad (via AOL’s ad delivery system) in the moments spent waiting at the street corner to cross.

The most successful mobile ad companies are those that know a lot about their customers—and that is why Google and Facebook, both of which have platforms that straddle their users’ mobile and desktop worlds, are such powerhouses, according to Ari Paparo, chief executive of an ad technology company called Beeswax, quoted in The New York Times.

Under Verizon ownership, Armstrong will continue to have a stake in the company’s future: He will continue to operate the AOL division.

Speaking on CNBC, he said the future will consist of “massive global-scale networks,” and, having invested plenty of his own money in AOL stocks since taking the helm in 2009, he says he will continue to invest in Verizon, a future giant.

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